The pitfalls of 360° deals – should a record label profit from an artist’s concerts?

As a young artist, you sign your dream contract with a record label, but you don’t delve into the details because you think you’ve hit the jackpot. When your career takes off, the label, with a smile on its face, politely asks for a share of the revenue from your latest, completely sold-out tour, even though it wasn’t involved in the tour at all. So why does the label expect a cut of the money you’ve worked so hard to earn on an exhausting tour? The answer is simple – because that’s what the contract says.

What exactly is a 360° deal?

A traditional record contract governs the rights to recordings, their promotion and issues relating to the distribution of revenue from their sales. The record label fully funds the production and promotion of the album and, as a result, reaps the majority of the profits from music sales. The artist, in turn, retains all income generated from other areas of artistic activity – concerts, advertising or merchandising.

A 360° contract goes further, as it grants the label a share in the revenue from the artist’s activities, which in the traditional model goes solely to the performer (and possibly their manager as well). However, it should not receive this for free. In return, the label is expected to be involved in areas of its artist’s activities from which it would like to derive additional financial benefits, such as artist management, advertising contracts (brand partnerships) or handling concert-related matters (booking).

Where are the pitfalls?

The idea of sharing revenue with a record label that does not come from music sales is not a bad one in itself – especially when the label’s involvement in the artist’s career extends beyond the recording industry. Problems arise when the contract is a one-sided 360° deal, meaning the artist shares revenue from concerts, advertising collaborations or merchandising, but without any support from the other party to the contract. The logic behind this approach is quite simple – since the record producer has invested a considerable amount of money in promoting the artist’s music, and thereby the artist themselves, which generates additional financial benefits, the record producer should get something out of it.

A separate pitfall can be signing a publishing agreement with a label, i.e. one covering the management of economic copyrights. Many entities offer this contract, so to speak, ‘on the side’, as part of a broader collaboration, despite lacking the necessary structures and expertise. In practice, “publishing services” boil down to registering works with ZAiKS. The artist relinquishes their rights (often permanently) and hands over a significant portion of their royalties from ZAiKS, in exchange for a one-off administrative task that they could have carried out themselves free of charge. A genuine music publisher should actively manage the catalogue: securing synchronisations for films and adverts, licensing the repertoire, or providing opportunities for other artists to create works.

What should you look out for?

A 360° deal need not be a death sentence, but its terms absolutely require negotiation. A few principles worth bearing in mind:

• limiting the scope of the contract to those areas in which the label will actually be active;
• clearly define the label’s obligations — a share in additional benefits should go hand in hand with a genuine contribution;
• an exit clause – i.e. the conditions under which the artist can regain full control over revenues, e.g. if a set revenue threshold is reached or the label fails to fulfil its obligations.

360° deals are a structure that can benefit both parties, provided they are fair. The problem is that young artists often sign them under time pressure and the euphoria of their first ‘big contract’, without fully understanding the consequences. And this, in turn, plays into the hands of record labels, which have no qualms about taking advantage of the situation.